THE JERUSALEM INSTITUTE OF JEWISH LAW 
Rabbi Emanuel Quint, Dean

Lesson # 129 (part three) • Buy or Sell Options

We are continuing on the topic where Reuven and Shimon are joint owners of a parcel of real estate. Reuven (or Shimon) wants to terminate their joint ownership over the parcel. Reuven makes a demand to Shimon that Shimon either buy Reuven’s ownership in the real estate or sell Shimon’s ownership to Reuven for a price stated in the demand. 

There must be a kinyan made to bind Reuven and Shimon. Reuven will bind himself by the kinyan to abide by Shimon's election to buy or sell, and Shimon will bind himself by kinyan to complete the transaction once Reuven makes the demand. The simplest way to make the kinyan is for Reuven to hand his handkerchief to Shimon and for Shimon to hand his own handkerchief to Reuven. If Reuven does not bind himself by a kinyan, he may rescind his demand even, after Shimon has exercised his option whether to sell or to buy. 

Similarly, Shimon may rescind the option he has made until such time as he binds himself by kinyan to complete the transaction according to his election. Thus, if Shimon first elects to sell, he may rescind this choice and decide to buy and may continue to change his mind until he binds himself by kinyan to abide by his choice. Should Shimon refuse to make a kinyan, 

Reuven may request that Beth Din compel Shimon to make a choice that will be binding upon him. If Reuven rescinds, then the parties are joint owners as they were before. If Shimon rescinds his choice, the parties will still not remain joint owners; Shimon can only change from sell to buy or from buy to sell. Shimon cannot insist that the parties remain joint owners since Reuven has made a demand that Shimon exercise his election to sell or to buy. 

If Reuven, before making a kinyan, rescinds his demand, the parties will remain joint owners. If either party thereafter makes a demand the price in the original demand will be the same unless it can be, shown that the value of the interest being sold has changed. 

There may be situations where the laws of these lessons dealing with the buy or sell option are combined with the laws of partition of the two lessons prior to these lessons. (See lessons 125 and 126, TT508 and TT509.)

Reuven and Shimon are the joint owners of two houses that they inherited from their father or purchased together as joint owners. The laws are the same if they inherited two fields or two items of personal property such as two automobiles. 

Assuming (1) each house has the requisite size to be partitioned as described in Lesson 125, (2) the houses' uses are identical, and (3) the houses are similar in size and value. In such circumstances, Reuven may demand that Shimon exercise the option to take title to whichever one of the houses he desires and Reuven will take title to the other house. Shimon may not reply that they should partition each house, but must exercise the (exchange) sell or buy option if Reuven insists upon his demand. Neither party may demand that the other exercise the sell or buy option for both houses as one unit. What has been said about two houses is true for two apartments within the house. However, one apartment in a building is not always similar to the other apartment, and the upper floor is not similar to the lower floor. A division of the house into two apartments may result in one apartment having better access to the street than the other apartment, with the differences sometimes being multiple. Reuven may make a demand that Shimon either sell or buy the entire house, which has two dissimilar apartments. The question of whether the apartments, or a commercial building and a residential building, are the equivalent, and any other similar situations, are governed by the decision of the Beth Din. Whenever Beth Din decides that the thing is not divisible and partitionable, then either party has the right to demand that the other exercise the option to sell or buy. 

Assuming (1) each house has the requisite size to be partitioned as described in lesson 125, (2) the houses' uses are identical, and (3) that the houses are not similar in value. Then Reuven can demand that Shimon exercise his option to take either the more valuable house and pay to Reuven the difference in value, or take the less valuable house and Reuven will pay to him the difference in value. Neither party may demand that the other exercise the sell or buy option for both houses as one unit. If their uses are not similar, the law is the same as if their value is not similar, to the extent that Reuven may demand that Shimon take one of the houses and that he, Reuven, will take the other house. 

Assuming (1) each house does not have the requisite size to be partitioned, (2) each house is similar in price, and (3) each house is similar in use, then Reuven may demand that Shimon take either one of the houses and leave the second house for Reuven. But Reuven cannot demand that Shimon either sell or buy both of the houses; nor can Reuven demand that Shimon exercise the option to sell or buy one of the houses, and then demand that Shimon exercise his option to sell or buy the second house. 

Assuming Reuven and Shimon inherit a field and a vineyard, and (1) neither is large enough to compel a partition, (2) their uses are dissimilar, and (3) their value may be similar, then Reuven cannot demand of Shimon, 'Take the field and I will take the vineyard, or you take the vineyard and I will take the field." Neither can Reuven demand that Shimon either sell his interest in both the field and the vineyard or buy Reuven's interest in both the field and the vineyard. Reuven may demand Shimon to exercise the sell or buy option regarding the field, and if he wishes may demand Shimon to exercise the sell or buy option regarding the vineyard. The demands must be made separately for each item. Thus, they may end up being joint owners of one or both or neither of the items. 

There may be times where the role of Reuven and/or Shimon are minors. Levi died, leaving his sons to inherit his estate, some of whom are minors and some of whom have attained their majority. The sons who have reached their majority may make a demand for partition (assuming that the inherited property is partitionable) and Beth Din will appoint a guardian for the minor children in the partition lawsuit.

Assume tat the property inherited from Levi does not lend itself to partition. Those who have attained their majority wish to make a demand that the minors exercise their right to sell or to buy their share of the inherited property. There is an opinion that Beth Din will appoint a guardian to protect the interests of the minors and determine whether it is in their best interest to sell or to buy on behalf of the minors. Similarly if Beth Din determines that it is not beneficial for the minors to remain as joint owners with their older brothers, Beth Din may appoint a guardian to make the demand that the older brothers either sell to the minors or buy the interest of the minors. 

The subject matter of this lesson is more fully discussed in Volume V Chapter 171 of A Restatement of Rabbinic Civil Law by E. Quint, published by Jason Aronson, Inc. and on sale at local Judaica bookstores. 

Questions to quint@inter.net.il